Sequoia partner Julian Beck advises that AI services ("autopilots") will initially target work that companies already outsource. This strategy avoids internal reorgs and firings, replaces an existing budget line cleanly, and targets buyers who are already comfortable with external work products.

Historically, payroll has dominated corporate expenses. As AI automates knowledge work previously done by humans, a significant portion of the budget will shift. Spend on SaaS, APIs, and model usage will grow from a small percentage to a major line item, displacing traditional labor costs.

AI will not primarily disrupt SaaS incumbents like Salesforce. Instead, its main economic impact will be automating repetitive labor, a market 40 times larger than enterprise software spend. AI-native companies are targeting labor-intensive roles like customer service, not trying to replace existing software subscriptions.

The primary economic incentive driving AI development is not replacing software, but automating the vastly larger human labor market. This includes high-skill jobs like accountants, lawyers, and auditors, representing a multi-trillion dollar opportunity that dwarfs the SaaS industry and dictates where investment will flow.

Companies like Sierra can't justify a 100x ARR valuation by targeting the existing software market (e.g., $8B Service Cloud). The bet is that they will capture a significant portion of the much larger human labor market ($200B+ for support agents). This represents a fundamental transition of spend from human capital to software.

The economic incentive for VCs funding AI is replacing human labor, a $13 trillion market in the US alone. This dwarfs the $300 billion SaaS market, revealing the ultimate goal is automating knowledge work, not just building software.

AI platforms like Anthropic and OpenAI are seeing unprecedented revenue growth because they're augmenting and competing with human labor costs. This is a far larger market than traditional IT budgets, enabling multi-billion dollar revenue months.

The true market opportunity for AI is not merely replacing existing software but automating human labor. This reframes the total addressable market (TAM) from the ~$400 billion global software industry to the $13 trillion US-only labor market, representing a thirty-fold increase in potential value.

While AI can improve existing software categories, the most significant opportunity lies in creating new applications that automate tasks previously performed by humans. This 'software eating labor' market is substantially larger than the traditional SaaS market, representing a massive greenfield opportunity for startups.